1. Field of Invention
This invention utilizes recent advances in biometric face recognition, a communication network such as the Internet, and information systems technology to prevent various forms of fraudulent applications from being approved.
2. Discussion of Prior Art
Check fraud is widespread in the U.S. A discussion of check fraud will detail approaches found in the prior art and clarify the role and need for the present invention.
Business Week has estimated U.S. check fraud losses to be in excess of $10 billion annually. Retailers, and ultimately their customers, absorb most of this cost. It is also a significant cost to U.S. depository institutions. In 1995, the Federal Reserve Board reported overall check fraud losses to U.S. depository institutions of $615 million annually.
Due to advances in color copier and scanner technology and widespread availability of desktop publishing systems, checks and identification documents (such as drivers' licenses) are more easily compromised than ever before. So, check fraud losses continue to mount.
It is time-consuming and expensive to catch and prosecute check fraud perpetrators. Conviction rates are low, and full restitution is an exceedingly rare event. Therefore prevention offers the best opportunity to significantly reduce check fraud.
The prior art includes a plurality of methods and commercial systems designed to prevent various types of check fraud.
Signature verification is one of the oldest means of check fraud prevention. However it is costly and time-consuming to fully implement; particularly considering that U.S. check volume is now 64 billion checks per year. Often the type of signature comparison being performed is more art than science. And in many instances of fraud the signature being used for comparison is unavailable, copied effectively, or compromised.
Video surveillance is also widely used to deter check fraud. However the bolder perpetrators are not deterred by video. By the time the fraud is detected, the video tape may well have been erased. Even if a video record is available, it will still be time-consuming and expensive to apprehend and prosecute the perpetrator.
Recently, banks in at least 17 states have required fingerprinting of noncustomers (i.e. individuals who do not have an account at the bank) before they will cash their checks. This approach has been highly successful in reducing noncustomer check fraud; however it has also proved to be somewhat controversial. In general, very few retailers would consider fingerprinting their customers because of the connotation of criminality. For similar reasons, very few banks will consider extending fingerprinting to their customers (i.e. individuals who do have accounts with them).
And that leaves a large hole in the current system. It is still far too easy to open a new checking account using false identification. Deluxe Corporation's Chexsystems T.M. is a widely-used commercial system used to screen the opening of new checking accounts. However, if the perpetrator has forged genuine identification documents, this type of screening will seldom be effective.
It can be seen, more generally, that applicant screening across multiple locations is far too lax. In the above discussion, an applicant moves freely from one financial institution branch to another opening new checking accounts, all based on false identification. In similar fashion a money launderer easily moves from one financial branch to another and, using bogus identification, rapidly deposits wads of cash. In still a further variation of the scheme, the applicant could be applying for loans at multiple branch locations, using false identification.
The above discussion suggests the need for biometric screening of applicants across multiple locations. A more complete examination of the prior art can help determine this. Will other emerging approaches solve the problem?
Returning now to the prior art specifically related to the prevention of check fraud, to authorize checks presented at point-of-sale, large computer networks and databases have been deployed. Three prominent examples of this type of commercial system are: Deluxe Corporation/Electronic Transaction Corporation's (ETC) SCAN system, Equifax's Welcome Check T.M., and First Data/Telecheck T.M.
Most current check authorization methods rely on machine-readable alphanumeric characters. In particular, the use of MICR (Magnetic Ink Character Recognition) technology is very widespread in the United States. By convention, the MICR characters are printed in the lower left corner on the front surface of bank checks.
Unfortunately, MICR is a mature technology which has been compromised using readily available tools and techniques. Magnetic toner cartridges can be inserted in most laser printers and print counterfeit MICR characters indistinguishable from the original.
More recently. Primary Payment Systems, Inc. (PPS) of Phoenix, Ariz. and Payment Solutions Network, Inc. (PSN) of Dallas, Tex., have been formed specifically to reduce check fraud. The PSN emphasis is on detecting and reporting bad checks more rapidly, without waiting for the paper checks to fully traverse the normal check clearing process. PPS is working to update check authorization databases on a daily basis with information such as accounts closed for cause.
In addition, a plurality of security approaches have been devised to discourage alteration or copying of the physical check. For example, SafeChecks T.M. offer artificial watermarks, copy void pantographs, chemical voids, microprinting, laid lines, and a plurality of additional security features to protect the physical check.
The PositivePay T.M. approach of Bottomline Technologies, Inc. is another noteworthy recent approach. It is designed to protect corporate checks from alteration of payee or amount. For example, payroll checks are protected in this way by providing an electronic list of payees and amounts of checks issued to nearby financial institutions. This electronic list is then compared to checks actually presented for payment.
Despite the above approaches, check fraud losses are still running in excess of $10 billion annually, and accelerating. A crucial limitation of the above methods is that they rely on identification documents (drivers' licenses, etc.) which are easily falsified.
Accordingly, the present invention is designed to prevent forms of fraud, including check fraud, in which false identification of the applicant plays a significant role. For example, New Account check fraud and Identity Assumption check fraud are two prevalent types of check fraud which rely on false identification.
In New Account fraud the perpetrator opens new checking accounts using false identification. A variety of techniques are then used to artificially inflate the balance of the accounts, withdraw funds from the accounts, and quickly flee.
In Identity Assumption fraud the perpetrator assumes the identity of a legitimate account holder, withdraws funds, and quickly flees.
Biometric solutions seem ideally suited to prevent this type of fraud. Biometrics refers to automatic computer-based systems and methods for positively identifying an individual. For example, electronic fingerprinting, iris scanning, and automatic face recognition are all examples of biometric approaches with this potential.
However, electronic fingerprinting and iris scanning carry the same connotation of criminality that has limited prior art applications of manual fingerprinting. Capturing the facial image of an applicant does not carry this connotation. Consumers are already accustomed to presenting a drivers' license (or like document) when conducting a financial transaction; and the drivers' licenses in all 50 states already contain an identification photo.
Since face recognition will generally be perceived as less intrusive than other forms of biometrics, and since the face image, once captured, can be used in many additional fraud prevention methods, it is the preferred biometric technique of the present invention.
All biometrics approaches, including face recognition, require some sort of initial enrollment of the true accountholder biometric information. Building this type of biometric database raises concerns about privacy. Even absent these concerns, it poses a real barrier to implementation. Certainly, it may take many years before a large database of biometric information can be constructed; and this work may be quite expensive. Financial viability requires an answer to the question: "How can a biometric approach provide an immediate deterrent to fraud--even before the database of biometric information is populated"?
Another important limitation of prior art approaches to check fraud prevention is the speed with which account holder and account status information can be shared among financial institutions and across branches. Programs are underway to update negative files (i.e. accounts closed for cause, etc.) on a daily basis; and that's a step in the right direction. In the above described scenarios this type of sharing needed to happen in minutes, not once every 24 hours, to prevent subsequent accounts from being opened.
Further, the perpetrators of New Account fraud will exploit organizational boundaries wherever it proves to be beneficial. From the perpetrators perspective it doesn't matter if the financial institution is an S&L, a bank, or a credit union. Any lack of cooperation or sharing of information between these institutions will be duly noted and exploited.
A practical solution must also be affordable and avoid offending good customers. For example, it is clearly not affordable to convert the 64 billion paper checks written in the U.S. each year to fully protected stock. And proposals to apply electronic fingerprinting biometrics have been so controversial they have been curtailed or withdrawn.
The prior art on check fraud prevention contains a related approach designed to combat check fraud: the Liberty Photocheck, U.S. patent application Ser. No. 08/573,273, titled "SYSTEM AND METHOD FOR CHECK AUTHORIZATION" by Richard F. Pliml, Robert E. Stiles, and John H. Payne. The Liberty Photocheck uses an account holder photo, encoded into a 2D barcode and preprinted on the check, to deter check fraud.
However, the Liberty Photocheck is focused on point-of-sale check fraud, not New Account check fraud, and in addition, will certainly face the practical problem: "How do you get the account holder photo in the first place"?
And therefore an approach is needed that will provide a source of account holder photos for the Liberty Photocheck or similar approaches, meet the above described requirements, and provide an immediate deterrent to the above described forms of check fraud, in particular New Account check fraud.
One of the building blocks of the required solution can be seen in recent progress with communication networks, such as the Internet. For example, by situating the biometric facial comparison capability on an Internet website, the required biometric capability can be readily accessible across organizational boundaries, affordable, and work in minutes (rather than hours or days).
In the early stages of implementation, the database of facial images (facebase) on the Internet website will be empty, or nearly so. How can New Account check fraud be prevented before the facebase is fully populated?
Fortunately, an extensive facebase is not required to start detecting behaviors known to have a high correlation with New Account check fraud. For instance, it is highly unusual for the same person to open multiple checking accounts at different financial institution branches within a short period of time. It is even more suspect if the person is using a different identity for each new account. To those skilled in the art this constitutes a "hard hit", an event with an extremely high correlation with New Account check fraud.
For example, in the present invention, though a perpetrator uses false identification to open a new checking account at a bank, his true biometric information (i.e. facial image) will be captured and uploaded immediately to the Internet website and stored in the facebase. If he then walks across the street and attempts to open a subsequent new checking account at a credit union, this behavior will be detected by the biometric facial comparison before the subsequent account is opened.
A useful byproduct of using facial biometrics to screen the opening of new checking accounts is that, over time, the facebase will become extensive, and can then support a plurality of additional fraud prevention techniques.
To conclude the discussion of the prior art specific to check fraud prevention, it is noteworthy that there are three additional immediate benefits to the financial institutions of using facial biometrics to screen the opening of new checking accounts. First, it is reasonable to expect that some would-be perpetrators will simply leave without opening an account because of a desire not to be photographed, especially since the photo is permanently logged and easily searched out by computer (unlike video tape). Second, the captured photos can be used by each financial institution internally to further secure other account holder transactions (i.e. deposits, withdrawals, transfers, and the like). And finally, when check fraud does occur, there is still the issue of who pays for it. Generally the financial institution will not be held liable; particularly if they can show they have exceeded the norm in protecting their account holders from fraudulent transactions.
More generally, in some forms of account fraud, such as loan applications, it may be the case that days or even weeks will elapse before a final determination is made to issue the loan. And it may be that additional screening, even absent the present invention, will determine the application is fraudulent before the loan is actually issued. If such cases, where the currently existing systems would have prevented the fraud anyway, the utility of the present invention is that it would have saved the time and expense of processing the fraudulent application, which may be considerable, and that it would have detected the fraud earlier.
Turning now to the prior art related to biometric face recognition systems and applications; how is the present invention distinguisable from them?
The field of biometric face recognition is growing and changing rapidly. The "Face Recognition Home Page" on the Internet, is perhaps the best single source of current information about Research Groups, Commercial Products, Freeware, Tutorials, related Internet Resources, Face recognition publications, and Upcoming events. Most prior art in this field is focused on making biometric face recognition work better, not on commercial applications. This prior art is easily distinguisable from the present invention. However, there are a few commercial face recognition products beginning to develop applications related to the present invention, and they deserve further attention.
Viisage Technology, Inc., of Littleton, Mass., has announced plans to use biometric face recognition to detect fraudulent drivers' licenses for the State of Illinois Department of Motor Vehicles. However, the screening proposed for Illinois drivers' licenses by Viisage Technology, Inc. is applied to a database of digital facial images after the license applications have been completed. It is not applied in an applicant screening branch while the applicant is present, and is not intended to detect fraud before any subsequent application can be processed.
Visionics, Inc. has announced a database version for its FaceIt T.M. face recognition software, called FaceIt T.M. DB. "Applicant Processing Systems" is listed among the intended applications. Further, the "internet version" of this product "features a client/server design with the server maintaining the database at some centralized location". These are among the reasons FaceIt T.M. DB is utilized in the preferred embodiment of the present invention. However, the present invention is distinct from FaceIt T.M. DB in that it uses facial similarity just as an initial stage to narrow the search; then it automatically examines historical transaction databases of prior requests to apply, or prior requests for privileges to detect behavior indicative of fraud. This requires substantial additional processing and multiple databases beyond what has so far been described in FaceIt T.M. DB. And it is also noteworthy that the present invention utilizes "requests to apply", or "requests for privileges", not data taken from completed applications. This is a significant difference since to see the full pattern of applicant behavior it is important to see all "requests to apply", not just those that resulted in a completed application--and it is important to detect this pattern at the earliest moment, not waiting until a prior application has been fully processed and accepted.
Mr. Payroll, Inc. of Ft. Worth, Tex., has announced plans to use the TrueFace T.M. face recognition system for its ATM-like check-cashing machines. This system is intended to secure check-cashing payment transactions, by verifying that the facial image matches the facial image of a previously enrolled customer. This is different from the present invention, which is screening the initial request to enroll for check cashing privileges, not the ongoing payment transactions.
To draw the distinction between the prior art on face recognition and this present invention more clearly, the present invention is focused specifically on applicant screening. It uses biometric facial comparison to narrow the search for fraudulent applications.
For example, the transaction history of prior applicants will typically include the type of transaction (e.g. request to open new checking account), the timestamp (i.e. the date and time application was made), and location (geographic location at which the application was made in person). And, therefore, the present invention has means to determine "have other applicants, with a strong facial resemblance to this applicant, recently engaged in the same type of application at nearby locations"? It is understood by those skilled in the art, that the present invention is not limited to the specifics of this example.
Still further distinctions are critical to fully understanding the uniqueness of the present invention. The present invention is not based on comparing the current applicant to known perpetrators, or to prior applications known to be fraudulent. At the time the facial comparison is made, it is not necessarily known that a prior application was fraudulent. In addition, the present invention is not designed to search through completed applications looking for duplicates, but to detect and prevent a subsequent fraudulent application before it is fully processed or accepted, and to do this across multiple locations.
The present invention is therefore novel in its application of biometric face recognition technology, and unique in its capabilities, in that it detects suspicious patterns of applicant behavior in minutes, before a subsequent application has been approved.